Energy chiefs could be barred from receiving payouts under new powers being handed to the industry regulator in moves design to better protect customers
Energy firms will be banned from handing bonuses to failing fat cat bosses under a government shake-up.
Regulator Ofgem will get the power to prevent executives netting windfalls if they breach existing licence conditions in a way that is seen to significantly harm consumers. The move will need legislative change
It is part of an overhaul of Ofgem designed to ensure it works harder for billpayers. The regulator has been accused of not coming down hard enough on energy firms in the past while households and businesses saw prices surge. It comes amid pressure on the government to do more to help households in the face of an energy shock caused by the Iran war.
Rather than scrap Ofgem, Labour’s response is to hand it new beefed-up responsibilities to “act as a true consumer champion”. It marks is the first major update to Ofgem’s scope since the regulator was founded in 2000.
It will be given stronger powers to enforce consumer law directly, meaning it will no longer need to go through a lengthy courts process to make sure customers get what they are owed if companies treat them unfairly. And reforms to the regulator’s remit mean it can regulate in new areas of the market, if needed.
The overhaul will also see Ofgem lose its oversight of home upgrade schemes. This will instead be coordinated within government by the Warm Homes Agency.
Energy Secretary Ed Miliband said: “This Government is fighting people’s corner, and today we set out steps to strengthen protections for energy consumers. This includes tough and fair measures to ban energy company bonuses if they break the rules.”
Tim Jarvis, interim Ofgem boss, said: “We have delivered significant reforms in recent years, but this review enables us to make changes at a more systemic level to ensure we are delivering an energy system that works for consumers, that is attractive to investors and provides a stable, reliable environment for participants in the industry.”
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “The Government is right to give Ofgem more teeth, a broader role in regulating businesses across the energy sector and a clearer focus on ensuring the energy market works for consumers.
“Stronger enforcement powers, executive accountability and the ability to step in when the market fails are exactly what campaigners have been calling for. But Ministers must be clear that if the duties placed on Ofgem pull in different directions, vulnerable households must always come first.”
Gillian Cooper, director of energy at Citizens Advice, said: “We welcome the actions set out in the review, which will strengthen consumer protections, enable a fair transition to green energy and give Ofgem the tools it needs to enforce the rules.
“Ofgem should now seize the opportunity to bring about a more innovative market, with better choices and protections for consumers, ensuring energy suppliers know there are real consequences for falling short.”
But Dhara Vyas, chief executive of trade body Energy UK, said: “It’s disappointing that this review falls short of the radical reform that is necessary to create a more streamlined and focused regulator, better equipped to both protect consumers and foster an investable energy sector.
“The long-term answer is to tackle deep-rooted structural and cultural issues and move towards regulation that is focused on delivering investable, innovative energy markets that bolster growth and lower bills. This fundamental problem has little to do with insufficient powers, but rather how the regulator has chosen to use its powers in the past.”
